Loan Structure for x2 IP's

Hi guys,

Recently purchased my second IP and i know i should have asked prior to purchase, with regards to loan structuring. Please assist me with the current situation i'm in.

Loan with CBA

IP1 - purchased in 2008, was paying P+I and now changed to IO recently prior to purchase of 2nd IP.

IP1 Purchase price $530k, Current Value $800k
Loan A: $150k - MISA Offset account has $150k (fully offset)

IP2 Purchase price $740k
Loan B: $210k (Equity from IP1) -with CBA Everday Offset account.
Loan C: $576k


All rent from IP1 and IP2, and my personal income, is being deposited into the Everyday Offset, to reduce the interest payable on Loan B.

Everyday Offset still has $20k remaining from the Equity release from IP1, for IP rainy days/emergency funds.

Everyday Offset currently has $30k in the account, with the assistance of my personal income. If in the event i need to withdraw some funds for 'personal use' am i contaminating the account?
(even though theoretically im not withdrawing from the equity, as it will still be above $20k)

Have I set up the account incorrectly, can some please advise how can i rectify the situation?

Where should i deposit my personal income, to assist to reduce the interest payable, but also allowing me to withdraw for personal use?

Do i need to setup another offset account for personal income (to reduce interest payments) without contaminating the account and allowing for tax deductions.

THANK YOU,
k88k.
 
Hiya

I'd deposit rent/salary into the offset and borrowed money (surplus from equity release) back into the loan account - and only redraw for IP related purposes.

I'm not an accountant though so seek specific taxation advice.

Cheers

Jamie
 
Everyday Offset still has $20k remaining from the Equity release from IP1, for IP rainy days/emergency funds.

Everyday Offset currently has $30k in the account, with the assistance of my personal income. If in the event i need to withdraw some funds for 'personal use' am i contaminating the account?
(even though theoretically im not withdrawing from the equity, as it will still be above $20k)

Have I set up the account incorrectly, can some please advise how can i rectify the situation?

You have already contaminated the $20k loan. Not able to rectify.

if the $20k was borrowed from loan B or another loan, then this loan has become a mixed purpose loan. You would be able to rectify this by splitting the deductible and non deductible portions on a reasonable basis. A lot of mucking around for such a small loan.

This is why you should never borrow money and park into a savings account.:)
 
You have already contaminated the $20k loan. Not able to rectify.

if the $20k was borrowed from loan B or another loan, then this loan has become a mixed purpose loan. You would be able to rectify this by splitting the deductible and non deductible portions on a reasonable basis. A lot of mucking around for such a small loan.

This is why you should never borrow money and park into a savings account.:)


Oh no!... if this can not be rectified, how do i stop this? what options do i have?

NB: i input some of my personal income into the account, as it is a Everyday Offset account.

I have NOT withdrawn any funds for personal use, all expenses so far are IP related.

Regards,

k88k.
 
Hiya

Talk to your accountant about your options - and don't stress too much, it won't be the end of the world!

The word "contamination" sounds so grim - hopefully it can be sorted. If not - it's not a huge amount to lose as a deduction (relative to other scenarios I've seen).

Cheers

Jamie
 
Don't if this makes a difference, but i do Not have PPOR.

All loans setup are investment purposes, and i have Not used any money for personal expenses.

I have just topped up with some of my personal income, into the equity loan.

Regards,

k88k.
 
I have just topped up with some of my personal income, into the equity loan.

Regards,

k88k.

Hi

Domjan V Ato will give a perspective of why you may have a challenge

the issue isnt the equity loan nor the offset account.

the issue could be the mixing of LOAN money and tax paid cash

I gather the ATO sees this like trying to unscramble an egg.

ta
rolf
 
Oh no!... if this can not be rectified, how do i stop this? what options do i have?

NB: i input some of my personal income into the account, as it is a Everyday Offset account.

I have NOT withdrawn any funds for personal use, all expenses so far are IP related.

Regards,

k88k.

I like Rolf's unscrambling an egg analogy.

Don't worry too much. Just don't claim the interest on the $20k loan - which wouldn't be much anyway and then split the loan from which the $20k came.
 
I like Rolf's unscrambling an egg analogy.

Don't worry too much. Just don't claim the interest on the $20k loan - which wouldn't be much anyway and then split the loan from which the $20k came.

Apologies if i get u guys angry, and i know i really shud be talking to my accountant to clarify.

But ur comment about the $20k (which is in the Everyday offset account), the $20k is offsetting my $210k loan.

How do i calculate the interest on the $20k loan?

Also should i now setup a Offset account for LOAN C asap, and deposit my extra personal income into this account so that i do contaminate the Everyday Offset account further?
 
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Apologies if i get u guys angry, and i know i really shud be talking to my accountant to clarify.

But ur comment about the $20k (which is in the Everyday offset account), the $20k is offsetting my $210k loan.

How do i calculate the interest on the $20k loan?

Also should i now setup a Offset account for LOAN C asap, and deposit my extra personal income into this account so that i do contaminate the Everyday Offset account further?

$20k x interest rate if it was IO the whole time. If it was PI then more complicated.

No need for a new offset.
 
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